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Rockefeller: The Economists’ Man in the Senate?

By David Leonhardt December 8, 2009 11:56 pmDecember 8, 2009 11:56 pm

Economists say that one of the most important pieces of health care reform is an independent commission to help set Medicare payment rates. The best hope for creating a serious version of such a commission may be Senator John D. Rockefeller IV, the West Virginia Democrat.

Jonathan Ernst/Getty ImagesSenator John D. Rockefeller IV.

Mr. Rockefeller has long supported such a commission. The question now is whether he will — and can — strengthen the somewhat neutered version of the commission in the current Senate health bill.

A bit of background: The commission — sometimes known as Medpac on steroids, sometimes known as Imac — would have the authority to recommend changes to Medicare payment policy if Medicare costs grew faster than a certain rate. Presumably, the commission would enact some of the reforms that economists and other health policy experts have long advocated, such as moving health care away from the fee-for-service model.

The Senate Finance Committee, in its version of health care reform, created a decent version of the commission, with one significant flaw. By law, hospital payment rates could not be altered until 2019. Until then, the commission could change payment rates only for other parts of the health system, such as home-health agencies and doctors. (And the Congressional Budget Office has been skeptical that Congress would allow the commission to change doctors’ payment rates.)

Senator Harry Reid of Nevada, the Democratic leader, did not fix this problem in his version of health care reform — the version now before the Senate — and he added an even bigger problem. As I explain in my column this week, the Reid bill would allow the commission to take action only if Medicare spending was rising even faster than total health spending. So if total spending rose 8 percent one year and Medicare spending rose 7.9 percent — a miserable situation — the commission would have to sit on its hands.

Mr. Rockefeller is apparently preparing an amendment to strengthen the commission in the Senate bill. That’s crucial, because the House bill has no commission at all. The only hope of getting a strong one is having the Senate create one and persuade the House to let it remain in a final bill sent to President Obama (who favors such a commission). But one big question is whether Mr. Rockefeller will try to fix only the problem involving the hospital exemption until 2019 — or also the larger problem created by the Reid bill.

Rebecca Gale, a spokeswoman for Mr. Rockefeller, sent me the following statement from him on Tuesday: “The goal of my original MedPAC legislation was to establish an independent entity that would help improve the quality of Medicare services, keep Medicare solvent, and remove the special interests from the process once and for all. The Independent Medicare Advisory Board created in the merged Senate bill is a strong step forward, but it needs improvement. The exception for hospitals and other providers is fundamentally counter to the goals of the original bill, and I will work to see that it is removed. A watered down approach to fixing Medicare simply will not work.”

Also relevant is the text of a Dec. 7 letter from a group of top health economists to Mr. Reid:

Dear Senator Reid:

We thank you for your leadership in bringing forward the Patient Protection and Affordable Care Act. This draft bill has four elements that several of us, in a Nov. 17 letter to President Obama, identified as crucial to health reform: 1) deficit neutrality, 2) an excise tax on high-cost insurance plans, 3) an independent Medicare commission, and 4) delivery system reform. The Congressional Budget Office estimates that the proposed legislation will not only achieve deficit neutrality but will reduce the deficit. The draft bill’s tax on high cost insurance plans should encourage efficiency and innovation in health insurance. As you and your colleagues continue to discuss health reform, we urge you to retain these elements. For the fiscal strength of the nation and to ensure Americans receive the best possible care, we also urge the Senate to strengthen both the role of the Independent Medicare Advisory Board and the delivery system reforms.

Independent Medicare Advisory Board

The Independent Medicare Advisory Board can help Congress modernize Medicare. The board will offer proposals to improve the quality, efficiency, and financial viability of the Medicare program. Yet the board’s effectiveness will be diminished by restrictions that the draft bill places on the circumstances under which the board’s recommendations will receive “fast track” status in Congress. One restriction is on the breadth of recommendations the board can make. Physician and hospital payments, which account for more than half of Medicare expenditures, are excluded until 2019 – two years after the 2009 Medicare Trustees Report projects that the Hospital Insurance Trust Fund will be exhausted. The board’s recommendations should encompass diverse aspects of Medicare, including changes to payments affecting physicians and hospitals, and all of its recommendations should be considered for “fast track” action in Congress.

Even after 2019 Congress will only “fast track” the board’s recommendations if Medicare spending per person rises more than overall health care spending per person. We do not believe that this will be enough to constrain excess growth in health care spending. The board’s recommendations should receive “fast track” status even if spending thresholds are not exceeded. These changes will enable the board more effectively to do its part to ensure Medicare’s longterm viability and to improve the quality of care Medicare beneficiaries receive.

Finally, the Senate might consider expanding the authority of the Medicare Commission so it does not only address Medicare policies but can provide recommendations on changes to Medicaid and other federal health programs.

Delivery System Reform

Some of the most far-reaching effects of health reform will come from changes in the delivery of care. The proposed legislation has many provisions to encourage such change. For example, it will help shift payment for care so that physicians and hospitals will be rewarded for achieving better health outcomes, not simply for delivering more services. The proposed incentives, however, would be much more effective if they were strengthened and implemented earlier. For example, the draft bill imposes a financial penalty on hospitals that readmit patients for complications of hospitalization, but the penalty applies to just 3 conditions and is too small. It does not start until 2013, and even then the penalty will be limited to 1 percent, rising to only 3 percent two years later. The penalties for hospital-acquired infections are even smaller and delayed longer. The Senate Finance Committee recommendations do more to reward doctors and hospitals for providing better health rather than more services.

Furthermore, despite the great interest in bundling payments for medical services, the draft bill calls for bundling only in a limited set of circumstances, mainly concerning hospitalization. The impact of the payment changes would be greater if they allowed bundled payments for chronic conditions such as congestive heart failure and diabetes over an entire year. After all, care for these chronic conditions accounts for more than half of all health care spending and avoidable services. The secretary should be authorized to implement pilots that improve the quality of care and lower its cost on a national scale unless legislation is specifically enacted that prohibits the Secretary from doing so.

You and your colleagues should be applauded for including the four essential elements of a successful, fiscally responsible reform strategy. Much more could be achieved if the Senate strengthens the Medicare Commission and the delivery system reforms. Doing so would help to ensure that health reform both improves the health care that Americans receive and slows the growth of spending. We are ready to work with you to achieve these goals.

Sen. Rockefeller should be applauded for his courage in attempting to cut costs and give us a sustainable health care system. However, he and other cost conscious reformers will need our full support; the senate will be assaulted by health care industry lobbyists whose constituents fear declining revenue from these proposed necessary reforms. We must always remember that inaction will be disastrous; health care costs are bankrupting our country, and Medicare, itself, faces insolvency by 2016. The system can be reformed in many ways that both decrease costs and improve patient care. Do not let opponents of reform convince you otherwise.

I just read your excellent column in today’s paper, along with your blog post on the independent commission. Just thought I’d add that there exist some simple, low-cost health care system reforms proven in gold-standard randomized trials to reduce health care costs (see below). If more of these can be identified – which seems very likely if the feds focus research funds in this area — the cost curve can probably be lowered without sacrificing quality of care.

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The first example is an electronic decision support tool for doctors, which uses clinical data from a patient’s insurance claims to identify potential errors in the patient’s care, and then alerts his or her doctor via email. This system, which costs approximately $1 per patient per month, has been shown in two rigorous randomized trials in large managed care settings to reduce hospitalizations by 9%, and health care costs by $10-$20 per patient per month, compared to the control group. This suggests potential annual savings of $20 billion or more if implemented nationally.

The second example is a brief educational program for low-income hospital patients about to be discharged. A nurse provides the patient with a clear plan for avoiding health complications after discharge, including contact information for the patient’s medical providers, dates for appointments and tests, a medication schedule, and related items. After discharge, a pharmacist phones the patient periodically to help ensure adherence to the plan. This low-cost program — $100-$150 per patient — has been shown in a large randomized trial to reduce rehospitalizations by 30%, and average health care costs by about 25%, during the 30 days after patient discharge, compared to the control group. This suggests potential annual savings of $10 billion or more if implemented nationally.

There are only three things that will bring down costs which are relatively simple.

1. Mandate that the authorization forms sent by the doctors and hospitals to all insurance companies be exactly the same, including all codes used, etc.

2. Mandate that all records be submitted electronically, with security encoding.

3. Mandate that rates of reimbursement be tied to two points over prime, not some arbitrary increases to make more money for the administrators of the insurance companies.

4. Eliminate all consumer advertising by Drug companies, whether in print or on radio, or on the internet or on television. Only the doctors need to be advised of new products, not consumers, who will demand what they think they want, not what the really need.

5. Stick an excess profits tax on drug companies where the drugs originated from studies and development work paid for by the government.

6. Set national standards for diagnostic testing so that it will not be unnecessarily done to make more money for the health care professional or the hospital.

7. Organize treatment by groups for particular conditions and eliminate pay for each individual treatment mode.

The more I read this column, the more I really find economists living in a la-la land of people who seem to fill (and apparently get paid for it!) their time with figuring out patronizing ways to tell other people how to live their lives, do their jobs, etc. Instead, of course, of actually getting out in the real world and DOING the real work themselves. And without ever having to prove that any of their cockamamy ideas work!

The post by #2, Jon Baron, is an example of this.

Mr. Baron has come up with the brilliant idea of “…an electronic decision support tool for doctors, which uses clinical data from a patient’s insurance claims to identify potential errors in the patient’s care, and then alerts his or her doctor via email.”

This is an INCREDIBLE invasion of privacy for the patient and insulting to the doctor. And how is this cost effective? This means some idiot, who doesn’t have the permission of the patient to snoop through his or her files, who has never MET OR SPOKEN TO the patient, is second-guessing the doctor. And this means that someone is paid to sit and read through everyone’s files and get paid for it! What a waste of money!

The second idea, “… is a brief educational program for low-income hospital patients about to be discharged.” Why only “low-income” patients? Talk about prejudice against low income people! Apparently, the assumption is that all low income people are stupider than other income groups. Even though, it’s been my experience that stupidity knows no income barrier. But what’s amazing is the assumption that doctors and hospitals shouldn’t already tell their patients — free of charge — “a clear plan for avoiding health complications after discharge, including contact information for the patient’s medical providers, dates for appointments and tests, a medication schedule, and related items.”

As for having “a pharmacist phone the patient periodically to help ensure adherence to the plan”: The idea that “poor people” are just too irresponsible and need to be “reminded” to take their medicine like children, here’s a thought: how about making prescriptions AFFORDABLE! That’s why people don’t take their medicine! Because they can’t afford it in the first place! Instead of giving that $100-$150 per patient to a third party, why not use it to pay for the medicine in the first place?

Joel Friedlander indeed has some good, common sense suggestions. Here are a couple of questions and embellishments:

Re: 3. Fine suggestion, but the system would need some way to deal with legitimate exceptions. An administrative appeals process that puts the burden of proof on the provider (it could be a heavy burden) would be a fair way to do this.

Re: 4. Good suggestion—I asked the same question recently in this forum. However, I presume we are talking here about prescription drugs only. Such a ban may be problematic given the First Amendment issues. Free speech also includes commercial speech, but is not given as much protection as political speech. Worth a try? Maybe.

Re:5. Perhaps a simpler way to deal with this rather than a windfall tax would be to require government research grantees to sign a license agreement with the government that allows the government to share in subsequent royalties from exploitation of discoveries. This is commonplace in the private industry.

Re:7. Given your track record, probably a good idea, but frankly I don’t completely understand the proposal. Perhaps you could elaborate, briefly?

The Affordable Care Act imposes economic burdens that are the equivalent of taxes, an economist writes. Read more…

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